The European Commission has issued a Statement of Objections against
Microsoft for its failure to comply with certain of its obligations under the
March 2004 Commission decision (the “March 2004 Decision”, see IP/04/382).
That decision found Microsoft to have infringed the EC Treaty rules on abuse of
a dominant position (Article 82) by leveraging its near monopoly in the market
for PC operating systems onto the markets for work group server operating
systems and for media players. One of the remedies imposed by the decision was
for Microsoft to disclose complete and accurate interface documentation which
would allow non-Microsoft work group servers to achieve full interoperability
with Windows PCs and servers. The Statement of Objections indicates that the
Commission’s preliminary view, supported by two reports from the
Monitoring Trustee (see IP/05/1215), is that Microsoft has not yet provided
complete and accurate specifications for this interoperability information.
After giving Microsoft an opportunity to reply to the Statement of Objections,
the Commission may impose a daily penalty.

Competition Commissioner Neelie Kroes said, “I have given Microsoft
every opportunity to comply with its obligations. However, I have been left with
no alternative other than to proceed via the formal route to ensure
Microsoft’s compliance.”

The obligations imposed by the March 2004 Decision were suspended pending the
Court of First Instance’s consideration of Microsoft’s request for
interim measures, a request denied by the Court of First Instance on 22 December
2004. After that date, the Commission engaged in discussions with Microsoft
about its compliance, and conducted a market test of Microsoft’s proposals
on interoperability (see IP/05/673).
In light of the results of that market test, the Commission issued a decision on
10 November 2005 pursuant to Article 24(1) of Regulation 1/2003 (the Article
24(1) Decision). This decision warned that should Microsoft not comply by 15
December 2005 with its obligation to: (i) supply complete and accurate
interoperability information; and (ii) make that information available on
reasonable terms, it would face a daily fine of up to €2 million.

Since the 24(1) Decision, Microsoft has revised the interoperability
information that it is obliged to disclose. However, the Commission takes the
preliminary view that this information is incomplete and inaccurate. This view
is supported by the report of the Monitoring Trustee, which concludes that,
“any programmer or programming team seeking to use the Technical
Documentation for a real development exercise would be wholly and completely
unable to proceed on the basis of the documentation. The Technical Documentation
is therefore totally unfit at this stage for its intended purpose.”
The report also states that, “the documentation appears to be
fundamentally flawed in its conception, and in its level of explanation and
detail... Overall, the process of using the documentation is an absolutely
frustrating, time-consuming and ultimately fruitless task. The documentation
needs quite drastic overhaul before it could be considered
workable.”

Professor Neil Barrett, the Monitoring Trustee, is a computer science expert
appointed by the Commission (see IP/05/1215)
on the basis of a shortlist of candidates submitted by Microsoft. He provides
impartial technical advice to the Commission on issues relating to
Microsoft’s compliance with the Commission’s March 2004
Decision.

Microsoft has five weeks to respond to the Statement of Objections and has a
right to an Oral Hearing. The Commission may then, after consulting the Advisory
Committee of Member State Competition Authorities, issue a decision pursuant to
Article 24(2) of Regulation 1/2003 imposing a fine on Microsoft for every day
between 15 December 2005 and the date of that Article 24(2) decision. The
Commission may then take other steps to continue the daily fine until Microsoft
complies with the decision.

As regards the second issue highlighted in the Article 24(1) decision, namely
the obligation for Microsoft to make the interoperability information available
on reasonable terms, the Commission, with the input of the Monitoring Trustee,
is currently evaluating additional information provided by Microsoft.